Jesse E. Eschbach

“ However, requiring a direct flow of capital to a cross-guarantor to avoid a finding of a fraudulent transfer "is inhibitory of contemporary financing practices, which recognize that cross-guarantees are often needed because of the unequal abilities of interrelated corporate entities to collateralize loans." ”

“ The effect of an LBO is that a corporation's shareholders are replaced by secured creditors. Put simply, stockholders' equity is supplanted by corporate debt. The level of risk facing the newly structured corporation rises significantly due to the increased debt to equity ratio. This added risk is borne primarily by the unsecured creditors, those who will most likely not be paid in the event of bankruptcy. ”

“ This permits the analysis to focus upon economic reality in the appropriate factual context without rewarding legal laxity or inflexibly ignoring real benefits merely because they have no place on the company's balance sheet. ”

“ IW became insolvent to pay an inactive affiliate's debts. Indeed, while IW was able to timely pay the bank pursuant to the loans for a time after guaranteeing the loans, IW eventually fell behind in payments to trade creditors just like IM had. In effect, by paying off IM's debts, IW kept IM out of bankruptcy by bankrupting itself. This shift of risk from the creditors of the debtor to the creditors of the guarantor is exactly the situation that [p582] fraudulent transfer law seeks to avoid when applied to guarantees. ”

“ Thus, we can look to interpretations of "reasonably equivalent value" from § 548 cases, as well as cases from courts interpreting other states' versions of the UFTA for assistance in predicting what an Illinois court would do.
B. The bankruptcy court determined as a matter of law that "a conveyance by a corporation for the benefit of an affiliate is not regarded as given [sic] fair consideration to the creditors of the conveying corporations," citing Rubin v. ”